EMERGING MARKETS-Latam currencies surge to 14-year high on dollar weakness

By Nikhil Sharma and Pranav Kashyap

June 5 (Reuters) - Latin American currencies were at a 14-year high on Thursday as a weak dollar continues to funnel liquidity into local notes, providing a tailwind amid the volatility sparked by U.S. President Trump's tariff actions.

MSCI's index for Latin American currencies .MILA00000CUS rose by 0.4%, taking it to its highest level since August 2011.

Emerging markets have leveraged the rotation of funds out from U.S. markets, with investors shedding their exposure to American assets to build a more geographically diversified portfolio.

The U.S. dollar =USD continued to drop for the second straight day, pushing its year-to-date decline to 9.2%.

"We will continue to see some sort of a (U.S. economic) slowdown and that perhaps would allow the Fed to cut interest rates and that will give some support to local currencies," said Andres Abadia, chief LatAm economist at Pantheon Macroeconomics.

"But I have to say that uncertainty remains extremely high. We don't know what will happen with the U.S. trade war."

The U.S. dollar's weakness has made it a preferred funding currency for popular "carry" trades, channelling heavy flows into higher-yielding emerging market currencies such as the Brazilian real, which is up over 9% this year.

The Brazilian real BRL= surged nearly 1%, punching through to its highest levels in nearly eight months.

Brazil sold $2.75 billion in dollar-denominated sovereign bonds on Wednesday.

Sao Paulo's main stock index .BVSP edged down 0.4%, while Mexico's local equity index .MXX gained 0.4%, poised to break a five-session losing streak.

Meanwhile, a gauge of the region's equities .MILA00000PUS rose 0.3%.

The Mexican peso MXN= added 0.2%, touching an eight-month high, fueled by a long-awaited uptick in consumer confidence, reversing seven consecutive months of decline. Further support came from surging oil prices, a critical revenue stream for the nation's coffers.

In Bogota, both the Colombian peso COP= rose 0.3%, while local equities .COLCAP inched up 0.1%. The government was contemplating a temporary suspension of its fiscal rule amid deteriorating public finances.

The peso of the world's biggest copper producer Chile CLP= rose 0.7%, riding the wave of elevated red metal prices. The Santiago stock index .SPIPSA slipped 0.1%, just off a fresh all-time peak.

Trump and Chinese leader Xi Jinping confronted weeks of brewing trade tensions and a battle over critical minerals in a rare leader-to-leader call on Thursday that left key issues to further talks.

Markets continued to suffer from increased tariffs on aluminium and steel that took effect on Wednesday. The move is likely to hit Mexico hard as it conducts significant industrial trade with the United States.

Ukraine's international bonds slid by more than 2 cents on Thursday, as investors' hopes for an imminent ceasefire dimmed.

Key Latin American stock indexes and currencies: